Bring your own tech - BYOD programs treated kindly by the CRA
Over the past number of years, many employers that require their employees to carry cellphones for business purposes have stopped buying the actual phone and, instead, have implemented what's become known as a "bring your own device" (BYOD) arrangement. Yet the employers will continue to pay someor all of the employees' cellphone bills.
The Canada Revenue Agency was recently asked to comment about whether employees would be considered to be in receipt of a taxable benefit when their employer reimburses their monthly cellphone plan expenses, assuming, of course, the phone is indeed required in order to carry out the employees' duties.
The CRA was responding to an enquiry from an employer that was considering implementing a BYOD program for employees who are required to use a cellphone for work. Under the program being considered, the employer would reimburse employees up to a fixed rate per month for the cellphone voice and data plans. The fixed amount to be reimbursed would be "reflective of the employment requirements in terms of data and voice use." The devices would be purchased by the employees,who would have title to the phones.
Under the BYOD program, the employer also required employees to commit to a multi-year plan with one of the cellphone providers so that the device could be purchased by the employee for either a nominal fee or a vastly discounted price. Should the employee, however, withdraw from the plan before the expiry of the committed term, the employee would be responsible for paying any cancellation fees.
The company was concerned that a taxable benefit could be assessed to the employees under the BYOD plan since the employees are able to effectively purchase their devices at a nominal or at least a substantially discounted price to what the device would otherwise cost if no multi-year commitment was signed, yet it was the employer, not the employee, thatwas paying the monthly fees.
The CRA responded that no taxable benefit would arise from the employee being able to purchase the discounted cellphone since the employer was not actually reimbursing this cost and the same nominal price would be available to any member of the public who signed a multi-year plan.
The CRA also confirmed that where an employer reimburses an employee for "reasonable voice and data services required for employment purposes," no taxable benefit would arise.